Auto Claims Face a Bumpy Road Ahead


Author: John E. Cantwell and Dorothy E. Kelly

Auto insurers are embarking on a ride into the unknown as motorists clock record mileage on U.S. roads and insurer underwriting results start to reflect a surge in driving. The Great Recession of 2008 pushed mileage downward as never before, until driving started to rebound and the negative trend reversed in 2012. Today, an improving economy and falling gas prices have more people driving more often. Miles driven set new records in 2015, and seasonally adjusted mileage continues to increase.

Americans drove a combined 3.2 trillion miles during the 12 months leading up to July 2016, according to the U.S. Federal Highway Administration. But this sign of economic recovery carries a downside for road safety in general and for auto insurers in particular. At Berkshire Hathaway’s 2016 shareholders meeting, Chairman and Chief Executive Officer Warren Buffett was asked about GEICO’s declining financial performance. In response, Buffett pointed to frequency and severity of claims rising “quite suddenly and substantially” in 2015.

Read more here.


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